Agnico-Eagle Posts 2Q Loss, Reaffirms Guidance

Agnico-Eagle Mines Limited (AEM) posted net loss of $24.4 million or 14 cents per share in second-quarter 2013, down from a profit of $43.3 million or earnings of 25 cents per share a year ago. The results were impacted by lower production, primarily from the Kittila mine, due to a previously announced extended maintenance shutdown during the quarter.

Barring one-time items other than stock-option expenses, the Canada-based mining company’s net loss was 5 cents per share. Analysts polled by Zacks were expecting earnings of 7 cents per share on average.

Revenues and Operational Highlights

Revenues declined roughly 27% year over year to $336.4 million in the reported quarter, and missed the Zacks Consensus Estimate of $345 million. Payable gold production in the quarter declined 15.5% year over year to 224,089 ounces. Lower production level was mainly due to the extended maintenance shutdown at Kittila.

Total cash costs per ounce for the second quarter jumped 18.9% year over year to $785 per ounce due to lower byproduct revenue at LaRonde and Pinos Altos mines. Realized gold price fell to $1,336 an ounce from $1,602 a year ago.

Gold production at Kittila in the reported quarter was 5,389 ounces compared with 35,228 ounces produced in the year ago quarter. The mine was operational for only 14 days in the quarter that led to the reduced production.

Payable production at the Pinos Altos mine in northern Mexico increased 4.6% year over year to 47,383 ounces of gold. Cash cost per ounce increased 35.5% year over year to $496 due to decline in realized silver price as well as stockpile movements and a stronger Mexican peso.

The Creston Mascota heap leach operates as a satellite operation to the Pinos Altos mine. Payable gold production at Creston Mascota was 10,147 ounces, a decline of 43.8% year over year due to temporary suspension of activities at the Creston Mascota mine.

Payable gold production at Meadowbank fell 6.6% year over year to 91,873 ounces in the quarter. The decline in production and was due to fall in realized grade compared due to mine sequencing. Agnico-Eagle expects the grade to improve during the remainder of 2013, which should result in higher production at lower costs.

Financial Condition

Agnico-Eagle’s cash and cash equivalents stood at $136.4 million as of Jun 30, 2013, compared with $289.1 million as of Jun 30, 2012. Long-term debt was $850 million as of Jun 30, 2013, compared with $830 million as of Jun 30, 2012.

Cash provided by operating activities in the second quarter was $75.3 million compared with $194.1 million in the prior-year quarter. Capital expenditures in the quarter were $171.8 million compared with $104.4 million in the year-ago quarter.

Outlook

Agnico-Eagle reiterated its production guidance and expects payable gold production in the band of 970,000 ounces to 1,010,000 ounces for 2013 with production levels in second half of the year contributing significantly to the overall production. The company expects stronger second half production from LaRonde, Kittila and Meadowbank, and the planned start of production at Goldex.

Agnico-Eagle reiterated its cash cost guidance for 2013 in the range of $735-$785 per ounce of gold. The company continues to expect all-in sustaining costs to be about $1,100 per ounce for 2013.

Given the recent slump in gold price, Agnico-Eagle has initiated a business review to optimize its asset base and boost shareholder value. As part of the move, the company is taking both immediate and long-term cost reduction measures.

Agnico-Eagle also announced capital and other costs reductions of roughly $50 million for the second half of 2013. The company also anticipates 2014 capital expenditures at existing mines and projects to be roughly $200 million lower than its previous estimate of about $600 million.

The company also remains on track to meet its 2015 production guidance of about 1.2 million ounces of gold.

In 2014, the company expects payable gold production to be in the range of 1,100,000 ounces to 1,140,000 ounces. A significant contributor is expected to be the LaRonde mine due to anticipated improvement in grades. The Goldex mine will be in operation for the full year and expected to one of the other prominent contributors along with the La India mine which is expected to start commercial production in 2014.

Agnico-Eagle currently retains Zacks Rank #5 (Strong Sell).

Another mining company Freeport-McMoRan Copper & Gold Inc. (FCX) recently released its second quarter results. The company reported earnings of 49 cents per share for second-quarter 2013, a decline of 33.8% from the year ago earnings of 74 cents. But it beat the Zacks Consensus Estimate of 41 cents. Profit slid 32% year over year to $482 million, hurt by lower prices.